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JOHANNESBURG: China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building “Belt & Road” infrastructure, according to a study published Tuesday.

Almost 80% of the rescue lending was made between 2016 and 2021, mainly to middle-income countries including Argentina, Mongolia and Pakistan, according to the report by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.

China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends.

“Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a former World Bank chief economist and one of the study’s authors.

Chinese loans to countries in debt distress soared from less than 5% of its overseas lending portfolio in 2010 to 60% in 2022, the study found.

Argentina received the most, with $111.8 billion, followed Pakistan on $48.5 billion and Egypt with $15.6 billion. Nine countries received less than $1 billion.

People’s Bank of China (PBOC) swap lines accounted for $170 billion of the rescue financing, including in Suriname, Sri Lanka and Egypt. Bridge loans or balance of payments support by Chinese state-owned banks was $70 billion.

Rollovers of both kinds of loan were $140 billion.

The study was critical of some central banks potentially using the PBOC swap lines to artifically pump up their foreign exchange reserve figures.

China’s rescue lending is “opaque and uncoordinated,” said Brad Parks, one of the report’s authors, and director of AidData, a research lab at William & Mary College in the United States.

World Bank warns of ‘lost decade’ of growth on China-led slowdown

The bailout loans are mainly concentrated in the middle income countries that make up four-fifths of its lending, due to the risk they pose to Chinese banks’ balance sheets, whereas low income countries are offered grace periods and maturity extensions, the report said.

China is negotiating debt restructurings with countries including Zambia, Ghana and Sri Lanka and has been criticised for holding up the processes. In response, it has called on the World Bank and International Monetary Fund to also offer debt relief.


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TimeToMovveOn Mar 28, 2023 02:06pm
The whole logic of CPEC was that it would serve as a connector to the BRI. Not only Pakistan screwed up the CPEC execution big time, it now looks like the promised connectivity with the BRI will not happen. So just like other BRI countries, Pakistan is stuck with loans, interest, and capital payments. China will no longer keep bailing out Pakistan as there is so much bad debt in the books, and projects like ML1 will never occur.
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Tulukan Mairandi Mar 28, 2023 06:08pm
Everywhere iron brother china invests, there is a trail of excessive debt, corruption, destruction, bailouts and misery.
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Az_Iz Mar 29, 2023 03:17am
@TimeToMovveOn, most of the CPEC investment so far is in power sector, which Pakistan needed badly. And these projects are producing electricity. Thar coal is generating the cheapest electricity. It wasn’t a game changer like the way it was made out to be. But it is not a total failure.
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